News Update Competition
25 March 2020
The impact of the COVID-19 outbreak on society and the economy is severe. Both the outbreak itself and the various government measures to mitigate its effects have a substantial bearing on the way businesses operate in almost every sector. Competition agencies around the world have indicated their understanding of these effects.This news update highlights the reactions of a number of European competition authorities, in particular those of the Dutch Consumer and Market Authority ('ACM'), to the COVID-19 outbreak as regards the application of the cartel prohibition and merger control rules. For the European Commission's COVID-19 State aid measures, we refer to our News Update of 20 March 2020. In a later news update, we will discuss in more detail the dividing line between 'good' and 'bad' cooperation agreements in times of crisis.
Cartel prohibitionThe ACM emphasised in a press release that cooperation between competitors that is necessitated by the COVID-19 outbreak is already allowed within the existing framework of competition law. If companies are uncertain as to whether their coronavirus-related cooperation initiatives are compatible with competition law, they may consult the ACM for informal guidance.
In an interview with the daily Dutch newspaper Het Financieele Dagblad ('FD'), the ACM's chairman, Martijn Snoep, gave assurances that the ACM will take the reality of the pandemic into account in its enforcement practice. For example, competing supermarkets may share data on stock levels among themselves and pharmaceutical wholesalers may share information with each other about the quantities of products they sell. At the same time, Snoep warned that the ACM will not hesitate to take action against companies that use the crisis as a cover for collusion on prices or misleading consumers.
The ACM's assurances have been confirmed by a joint statement of the European Competition Network ('ECN') on Monday 23 March 2020. The ECN declared that – while the objective of a level playing field between companies is still relevant – it understands that this extraordinary situation may trigger the need for companies to cooperate to ensure the supply and fair distribution of scarce products to consumers. In these circumstances, the ECN will not actively intervene against necessary and temporary measures put in place to avoid shortage of supply. At the same time, the ECN emphasises the importance of ensuring that products considered essential to protect the health of consumers in the current situation remain available at competitive prices. The ECN therefore will not hesitate to take action against companies taking advantage of the current situation by cartelising or abusing their dominant position.
The ECN statement comes after an announcement by the UK government introducing a temporary relaxation of elements of competition law to help supermarkets work together. In addition, the UK Competition Authority ('CMA') announced that it has no intention of taking competition law enforcement action against cooperation between companies to the extent that this is necessary to protect consumers, for example by ensuring security of supplies. The president of the German Bundeskartellambt also expressed willingness to let firms cooperate and exchange necessary information in light of the exceptional circumstances.
Merger controlThe European Commission ('EC') has announced special measures due to COVID-19. The EC encourages companies to delay merger control notifications, where possible, and will also temporarily accept and actually encourages all submissions in digital form. The ACM has not formally announced measures regarding merger control procedures due to COVID-19, but it may well be that ACM will contact notifying parties to agree on alternative deadlines, which will presumably lead to delay in pending and new merger control procedures. If the undertakings involved in a proposed concentration meet the Dutch turnover thresholds, the regular notification and standstill obligations continue to apply.
Where companies are unable to await the ACM's approval for a proposed concentration – for example if the target company is in serious financial difficulty due to the COVID-19 measures and the proposed transaction is necessary to avert bankruptcy – Snoep noted the possibility of a temporary exemption from the standstill obligation. During the 2008 financial crisis, the ACM's predecessor, the NMa, frequently applied this exemption. A similar exemption from the standstill obligation exists under the EU merger control regime.
- Competition laws continue to apply, also during the current COVID-19 crisis.
- The existing competition law framework already provides for the possibility to exempt certain agreements that benefit the economy and consumers, are necessary and proportionate from the cartel prohibition.
- European competition authorities have emphasised that they will not intervene if companies temporarily cooperate, if this cooperation is necessary to ensure the supply and fair distribution of scarce products to consumers.
- However, companies are not allowed to use the crisis as a cover to collude on prices, mislead consumers or as a defence for structural and non-essential collusion.
- To mitigate competition risks, it is advisable for companies to consult their legal counsel or contact the ACM or the EC before entering into cooperation initiatives with competitors.
- For mergers and acquisitions, companies are advised to carefully assess the timing implications of the COVID-19 outbreak for their transactions and engage with the ACM or the EC regarding potential delays or possible procedural adaptions resulting from the exceptional circumstances. If an acquisition is necessary to avert bankruptcy of the target company, parties may request a temporary exemption from the standstill obligation from the ACM or the EC.